Rio Tinto
has secured a $NZ30 million subsidy from the New Zealand government that will help keep its Tiwai Point aluminium smelter open and also clears the way for the initial public offer of Meridian Energy.

Rio-controlled New Zealand Aluminium Smelters (NZAS) also secured a price reduction in electricity charges for the smelter in a renegotiated contract with supplier Meridian. The electricity price will be reduced to “around pre-2013 levels," according to New Zealand state owned enterprise minister Tony Ryall.

The deals will ensure the smelter, one of the country’s biggest electricity users, stays open until at least January 2017. They come as Rio Tinto is also seeking to get cheaper energy supplies for its Gove alumina smelter in the Northern Territory, which is also held within its Pacific Aluminium business.

Negotiations between Meridian and NZAS over power supplies had been continuing for more than a year. Rio is packaging up Pacific Aluminium, which comprises its less profitable alumina and aluminium assets in Australasia, for a sale or float.

The $NZ3 billion-plus float of Meridian, tentatively scheduled for October, would have been problematic without certainty on the future of the contract with the smelter, Meridian’s largest customer. Potential investors in Australia said they wanted clarity about the future of the plant to be able to properly assess Meridian’s valuation.

Mr Ryall said NZAS approached the government for further assistance to “return the smelter to viability in current market conditions."

He said the deal would provide relief for smelter workers and the economy of the Southland region in the country’s far south, as well as greater stability for the electricity market in New Zealand.

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He said the deal provides the smelter with more flexibility in its operations, so it can reduce its contracted volume to 400 megawatts from 572 MW starting in 2015. NZAS can terminate the deal from January 2017 by giving notice at least 15 months beforehand.